Russian Banks In Armenia Downplay Western Sanctions

The Armenian subsidiaries of two leading Russian commercial banks sanctioned by the European Union and the United States in connection with the Ukraine crisis ruled out on Wednesday any serious impact on their operations.

EU member states on Tuesday imposed new sanctions on Russia because of its continuing assistance to pro-Russian rebels in eastern Ukraine widely blamed for the July 17 downing of a Malaysian airliner. In particular, they decided to cut off Russian state-owned banks from European capital markets. Europeans will now not be allowed to buy debt, equity or other financial instruments with a maturity higher than 90 days in Russian state-owned banks or their subsidiaries.

Two of the sanctioned banks, Gazprombank and VTB, have subsidiaries in Armenia playing a major role in the local banking sector.

The U.S. followed up on the EU move hours later, adding VTB and two other state-controlled Russian banks to a list of companies to which U.S. persons and firms are barred from providing financing for longer than 90 days. Gazprombank was included on that list earlier this month. The bank, which is Russia’s third largest by assets, insisted afterwards that the sanctions will not affect the stability of its operations and finances.

Armenia’s Areksimbank, which is fully owned by Gazprombank, made similar assurances on Wednesday. Yelena Markova, an Areksimbank spokeswoman, told RFE/RL’s Armenian service (Azatutyun.am) that the sanctions against its parent company will not have a serious impact on the bank because it is a separate legal entity.

The VTB Armenia bank likewise played down the significance of the U.S. sanctions, saying that they “will in no way reflect on our clients.” “The bank will continue to provide the full scope of services and obligations without any restrictions and in all of the currencies it has worked with,” the bank said in a statement. This includes operations via the MasterCard and Visa international payment systems, it said.

The statement made no mention of the EU sanctions, further details of which are expected to be published on Thursday.

Even if the two Russian-owned banks avoid major losses, the broader Western sanctions against Moscow may still have negative knock-on effects on the Armenian economy. Russia is Armenia’s leading trading partner and the main source of vital remittances from Armenian migrant workers. Armenian government officials have repeatedly acknowledged that economic growth in the country could slow down as a result.